EDD computer project came in late, overbudget

The state's new $158 million online system for managing and paying disability insurance claims, which was intended to speed financial help to workers who are sick, hurt or parents of a new child, was three years late and about $123 million over its original budget when it launched last fall, kicking off a rocky transition that left thousands waiting for help.

Approved in 2006, the project to automate the state's antiquated paper-based system for filing disability claims was expected to take three years to complete and cost $35 million, according to a report released in May by the state Legislative Analysts Office. The finished product, later dubbed SDI Online, would allow people to file disability insurance paperwork online and streamline the program's management and payment of claims.

After three years of delays, the system finally launched in October, kicking off a labor-intensive transition from paper. During the transition, the program has accepted claims filed on both paper and via SDI Online, an increased workload that slowed service and delayed payments to thousands of hurt and sick workers.

On Thursday, people waiting in the crowded lobby at the disability program's office in Santa Ana said the online system had not helped them resolve problems with claims. Some said they logged in but couldn't see the status of their payments. Others said they could see their benefit information, but they couldn't do anything else.

Kay Siakisini, of Orange, said an eye surgery in late September left her mostly blind in one eye and temporarily unable to work at her job as a retail merchandiser. When her first payment was late, she was unable to get help from the automated phone system (it hung up on her every time she called), and her attempts to track payments using SDI Online were just as fruitless.

"I spent I think four hours on the computer one day and it was just ridiculous," said Siakisini. "So I just keep coming back here. I give up."

It took about five weeks to get her first payment and four weeks to get the next one, she said.

Officials with the Employment Development Department, the state agency that runs the disability insurance program, apologized to the public and assured people that SDI Online works.

It said the cost of producing the system was justified and was in no way the fault of its developer, Deloitte Consulting LLP, a New York-based company that has been criticized, sued and attacked by lawmakers for its work on state projects that went over budget and failed.

EDD's original plan was to hire a company to develop the computer project within nine months, according to the LAO report. But in 2007, officials amended the plan because "procurement-related delays" caused the contracting process to take about 16 months, delaying the whole project by 23 months. Officials revised projected costs downward to $33 million.

The biggest cost increase from the original estimate -- about $84 million -- happened during the contract-bidding process in 2009, state officials said.

"After extensive research was conducted by two vendors who submitted bids, both companies came to the conclusion that the completion of the project would entail more time, money and expertise than the EDD was first able to estimate," EDD officials said Monday in a statement to the Watchdog.

One of the two companies, Unisys Corp., did not meet the bidding requirements, so its bid could not be reviewed, said Kevin Callori, a spokesman for EDD. So EDD awarded the contract to the other bidder, Deloitte Consulting.

The state agreed to pay Deloitte $59 million to develop SDI Online and 17 "interfaces," or tools to allow communication between SDI Online and other systems, state officials said. The new estimated cost for the project was $119 million, and its new launch date was January 2013.

By November 2011, costs had climbed another $39 million -- $8 million of it to pay for extra work EDD asked Deloitte to perform because of work needed to connect the new system to a new wage database, according to the statement provided by EDD.

EDD officials say that theyare happy with Deloitte's work and with SDI Online's performance.

But other state agencies have blamed Deloitte for costly, high-profile failures.

The state originally planned to pay Deloitte $33 million to develop the courts' computer project. One hundred contract amendments later, the state had paid Deloitte $310 million. The state spent $580 million on the project by the time the courts pulled the plug last spring because court officials didn't think they would have the money to deploy it.

Deloitte agreed to repay $16 million to compensate for delays caused by "numerous quality issues," a state report said.

The company also was the developer behind a hulking $95 million computerized payroll system for the Los Angeles Unified School District, according to the Los Angeles Times. When the system launched in 2007, it overpaid tens of thousands of teachers by a total $60 million, while underpaying others.

Deloitte agreed to repay the school district $8.25 million and to forgive $10 million in unpaid invoices, according to the article. The money covered about half the cost of fixing the system.

The high-profile projects prompted critical state audits and a legislative effortto prevent companies such as Deloitte from winning new state contracts. That legislation -- which would have placed a five-year ban on state contracts for companies that had been successfully sued for breach of contract -- was defeated.

Deloitte officials told the Los Angeles Times that extra costs and problems with projects often were the result of officials' requests for work and services beyond what was included in contracts.

According to EDD officials, that's what happened with SDI Online.

After settling on the original contract in 2009, officials said they asked Deloitte to update SDI Online -- requests that accounted for the cost increase in 2011.

The work was mission-critical because new legislation necessitated upgrades to the department's mainframe database, changing things so that SDI Online could no longer communicate with it as required, officials said.

"Deloitte has been an active partner from the very beginning, providing much-needed expertise and guidance in the design and implementation of this system, which provides faster, easier and more accurate services to those in need, especially once we are able to complete this transition from the old system," EDD officials said in a statement to the Watchdog.

As far as Siakisini was concerned, her money could have been better spent.

"For that kind of money, just hire some more people and get a bigger office," she said. "Let's get some people working and make it so you can talk to someone face to face and get your problems solved."

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